SUNation Energy, Inc. Q1 FY2023 earnings call

Management Statement and Operational Highlights

• Hawaii Success: E-Gear licensed its EMC to Eguana, a deal that is capital light with royalty revenue potential.
• New York Momentum: SUNation had strong growth, achieved 100 MW of lifetime solar installed, and had pending installations providing visibility on revenue. Also, achieved positive operating cash flow from continuing operations in Q1.
• Workforce Development: SUNation's Brian Karp partnered with a community college for a solar training program to address potential workforce shortages.
• Market Penetration: SUNation entered the new build market with a deal to outfit homes in a Baiting Hollow subdivision with smart energy systems.

Segment Performance

• Hawaii: Residential kilowatts installed in Q1 2023 were up 14% versus Q1 2022. Battery attach rate was 85%. E-Gear subsidiary licensed its Energy Management Controller (EMC) to Eguana for royalty revenue.
• New York (SUNation): Kilowatts sold were up around 30% versus last year, and kilowatts installed were up 65% versus last year. SUNation achieved 100 megawatts of lifetime solar installed. There was an estimated $38 million worth of pending installations at quarter-end, close to half of the 2023 revenue guidance.
• Financials: Q1 2023 GAAP revenue was $22 million, up 28% from the fourth quarter. Gross profit was $8 million, up 60% from the fourth quarter. Pro forma revenue was up 60% year-over-year. Cash available for the operating business was $3.4 million, with another $4.2 million of restricted cash and liquid investments.

Guidance

• Revenue: Sustained the full-year revenue range of $80 million to $85 million, with Q1 overperformance trending to the top of the range.
• Cash Flow: Achieved positive operating cash flow from continuing operations in Q1, ahead of the previously stated goal of achieving positive cash flow from operations in the second half of 2023.

Risks

• Workforce Shortages: Potential for skilled field labor shortages in high-growth markets, though proactive measures like community college partnerships are in place.
• Regulatory Changes: Uncertainties in regulatory frameworks and policy changes affecting battery attachment rates and profitability, such as upcoming time of use rate changes in Long Island.

Question and Answer

Q: Can you give color on the cadence of revenue throughout the year?

A: Q2-Q3-Q4 are expected to have sequential growth, with Q4 being strong. Q1 2024 may see a slight dip due to one-time shifts of revenue from Q4 2022 to Q1 2023.

Q: What's the trend in battery attachment rates?

A: Hawaii has an 85% battery attach rate (weighted average), while Long Island is low-single-digit. Policy changes like time of use rates in Long Island are expected to drive higher attachment rates.

Q: Is the positive cash flow sustainable?

A: Q1 positive cash flow was due to broad-based growth, cost control, and synergy efforts, with confidence in sustaining margin management for continued positive cash flow.

Q: How do you evaluate M&A opportunities for synergies?

A: Evaluate size, financials, cultural fit, customer experience, and margin alignment, focusing on integrating businesses to optimize lead generation and unit economics.